Is SA going through one of its periodic moments of good cheer and rapture, soon to be punctured, or are we at the edge of a bright new age with real and sustained growth and wealth creation in prospect?
For all the action and noise you’d think we had made an almost mystical crossing since the elections on May 29, four months ago. The ANC loses outright control of the country and forms a government of national unity, with the DA its biggest partner.
Suddenly the wildly undervalued local stock market starts to fly again. The US cuts interest rates and the rand goes through the roof against the dollar. Our debt becomes cheaper to repay. Eskom hasn’t been down since March 26.
In London, deputy president Paul Mashatile leads a delegation heavy with cabinet ministers on an investment drive and rings the opening bell at the London Stock Exchange on Tuesday. Ahead of glittering functions, Mashatile tells Bloomberg TV and potential investors that SA is “open for business” and that the GNU “is working”.
“We could be growing at about 1.5%,” he says. “We want to grow the economy particularly through infrastructure investment; build new roads, dams, new railways lines.”
In Johannesburg President Cyril Ramaphosa, fresh from a state visit to China, is meeting business leaders to launch “phase 2” of his partnership with business. Phase one is credited with helping end Eskom’s load-shedding, opening up the state logistics (rail and port) monopoly to the private sector and beginning to clamp down on crime.
Launching phase 2, Ramaphosa tells executives “SA’s star is rising” and that the partnership with business is helping “accelerate the country’s path towards sustainable inclusive economic growth and job creation, through increased investment and more positive sentiment”.
Heady stuff, and there’s little doubt a welcome general positive mood in the country is directly related to the GNU, and that two elements in it are vital — the presence in it of the DA and — whatever your view of him may be — the presence of Ramaphosa himself.
It is easy to tease the president — he is often ineffective and inattentive and reluctant to lead from the front. But he is a fundamentally decent constitutionalist and it matters.
But while a lot is suddenly going right we must not let our guard down. For a start, the businesses in the room with Ramaphosa, the investors listening to Mashatile read out yet another speech — are big, big companies. They are not the future. They are not going to be creating any more new jobs. If anything they, like the state, are overstaffed and privileged.
The rand is a cork in a stormy sea. Big institutional investors buy it when the US isn’t paying great interest rates and drop it again when they spot something better. What’s important is that the currency is managed transparently and well by the real jewel in our economic crown — the SA Reserve Bank.
Yet the Bank wasn’t able to prevent our greylisting early last year by the Financial Action Task Force, and I’m unmoved by all the confident declarations now from government that we are going to get the greylisting lifted. We’ll wait and see, thank you. Do your jobs.
NatWest International just shut down an account I had had in Jersey for more than 30 years. When I asked why they said they were closing all accounts held by South Africans. And the end of load-shedding is fantastic, but in reality all that has happened is that Eskom is doing its day job again, 20 years after the ANC first got hold of it.
Mashatile’s forecast 1.5% growth next year is the current National Treasury forecast. In London, JPMorgan analysts were telling him we need two years of 2% growth, according to Hilary Joffe reporting for this newspaper from London, “to get long-term value investors to pay attention”.
Two years of nearly impossible growth then. That’s how much damage has been done. In Johannesburg, Discovery founder and CEO Adrian Gore went further and told Ramaphosa he reckoned we could get north of 3% next year. That would require a huge stretch, and you have to wonder what or where Ramaphosa’s political limits are. He seldom takes big political risks.
But any real growth is going to require investment and for investment to make any difference it has to measurably improve our productivity. And to attract investment into infrastructure the returns have to be enticing. Will dams do that? Railway lines?
The problem with trying to fix SA now is that the right people may not be in place. Just this week Transnet CEO Michelle Phillips has had to write to all respondents to Transnet’s request for proposals to run the big container terminal at Durban port, and in effect delay an already much-delayed process by another six months until the end of March next year.
So while Ramaphosa was extolling the virtues of reform in Johannesburg, his vehicle for logistics reform had run out of time. According to the rules of the request for proposals that led to ICTSI of the Philippines being declared Transnet’s preferred bidder a year ago, that process ended on September 30, still held up by a legal challenge that the Transnet CEO fears she may lose.
It’s a bump in the road, but there will be lots of those and they take up precious time if you’re a politician looking for signs of success as elections loom again. Fixing the electricity supply could turn out to have been easy.
There’s going to be no investment into political projects such as a big dam in the Eastern Cape, and not much into rail or ports when government doesn’t have the courage to take a big step back and be content with regulating rather than controlling.
Private sector investment will follow concessions for private sector management of infrastructure, just as had been planned in the Durban port. But investment doesn’t happen until it happens. And until then we spectators have an obligation not to get too excited by all the fuss.
• Bruce is a former editor of Business Day and the Financial Mail.
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